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                Ronald Johnson is a senior tax consultant with the GTA Tax Consulting Firm.&nbsp; Ronald has been supervising Fred Sanchez, a staff accountant, on the preparation of Schedule A of Form 1040 for a married couple, Harry and Betty Sanderson.&nbsp; The Sandersons reported adjusted gross income of $100,000.&nbsp;<br>
                <br>
                Fred has prepared the following memo providing support for the amounts he has included on Schedule A.&nbsp; Documentation for the amounts used by Fred in his computations can be found in the exhibits tab.<br>
                <br>
                To revise the memo, click on each segment of underlined text below and select the needed correction, if any, from the list provided.&nbsp; If the underlined text is already correct in the context of the document, select [original text] from the list.<br>
                <br>
                &nbsp;
                <div class="boxed" style="text-align: center;">GTA Tax Consultants<br>
                    34 Spruce Street<br>
                    Carleton, NC 09999</div>

                <div class="boxed"><br>
                    To: Ronald Johnson<br>
                    From: Fred Sanchez<br>
                    Re: Mr. and Mrs. Sandersons' Schedule A<br>
                    <br>
                    I have summarized the amounts reported on the Sandersons' Schedule A below.&nbsp; I have also attached the supporting original documents along with my computations of the amounts included on Schedule A.&nbsp; I believe everything has been properly computed, but if not, I am happy to correct any mistakes I have made.<br>
                    <br>
                    <u>Summary of the Sandersons' Schedule A</u><br>
                    <br>
                    Schedule A, line 1: Medical and dental expenses:<br>
                    <span class="parent mbg far {if condition='isset($log.1)'}xbg{/if}">{if condition='isset($log.1) && $log.1.topic_v eq 2'}<s>{/if}The amount reported as medical and dental expenses on line 1 should be $24,250.{if condition='isset($log.1) && $log.1.topic_v eq 2'}</s>{/if}</span>
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                                    <input type="radio" name="topic_t[1]" value="1" {if condition='isset($log.1) && $log.1.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>The amount reported as medical and dental expenses on line 1 should be $24,250.</em>" ><br/>
                                    <input type="radio" name="topic_t[1]" value="2" {if condition='isset($log.1) && $log.1.topic_v eq 2'}checked{/if} title="<em class='span'>The amount reported as medical and dental expenses on line 1 should be $14,000.</em>"><br/>
                                    <input type="radio" name="topic_t[1]" value="3" {if condition='isset($log.1) && $log.1.topic_v eq 3'}checked{/if} title="<em class='span'>The amount reported as medical and dental expenses on line 1 should be $14,250.</em>" ><br/>
                                    <input type="radio" name="topic_t[1]" value="4" {if condition='isset($log.1) && $log.1.topic_v eq 4'}checked{/if} title="<em class='span'>The amount reported as medical and dental expenses on line 1 should be $15,500</em>"><br/>
                                    <input type="radio" name="topic_t[1]" value="5" {if condition='isset($log.1) && $log.1.topic_v eq 5'}checked{/if} title="<em class='span'>The amount reported as medical and dental expenses on line 1 should be $15,750</em>"><br/>
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                    In addition to the $24,000 shown on this invoice, I included the $250 in cab fare the Sandersons paid to get to and from the procedures described above.&nbsp; Consequently, the total amount I reported as deductible medical and dental expenses on line 1 of Schedule A was 24,250.<br>
                    <br>
                    Schedule A, line 6: Real estate taxes:<br>
                    <span class="parent mbg far {if condition='isset($log.2)'}xbg{/if}">The amount reported as real estate taxes on line 6 should be $10,771.</span>
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                                    <input type="radio" name="topic_t[2]" value="1" {if condition='isset($log.2) && $log.2.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>The amount reported as real estate taxes on line 6 should be $10,771.</em>" ><br/>
                                    <input type="radio" name="topic_t[2]" value="2" {if condition='isset($log.2) && $log.2.topic_v eq 2'}checked{/if} title="<em class='span'>The amount reported as real estate taxes on line 6 should be $10,221.</em>"><br/>
                                    <input type="radio" name="topic_t[2]" value="3" {if condition='isset($log.2) && $log.2.topic_v eq 3'}checked{/if} title="<em class='span'>The amount reported as real estate taxes on line 6 should be $26,769.</em>" ><br/>
                                    <input type="radio" name="topic_t[2]" value="4" {if condition='isset($log.2) && $log.2.topic_v eq 4'}checked{/if} title="<em class='span'>The amount reported as real estate taxes on line 6 should be $27,319.</em>"><br/>
                                    <input type="radio" name="topic_t[2]" value="5" {if condition='isset($log.2) && $log.2.topic_v eq 5'}checked{/if} title="<em class='span'>The amount reported as real estate taxes on line 6 should be $44,651.</em>"><br/>
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                    Although the Sandersons also provided us with two property tax statements from the City of Telluride, Colorado (see attached), I did not include those property taxes in the amount deducted on Schedule A because the first parcel (parcel number 19-11-49-448-412) is for the Sandersons' vacation ski chalet and is not the Sandersons' principal home (1487 Omaha Street is their principal home), and because the second parcel (parcel number 19-11-49-448-415) is a ski chalet the Sandersons rent out year-round. Consequently, the amount I reported as real estate taxes on line 6 of Schedule A was the $10,771.00 shown above.<br>
                    <br>
                    Schedule A, line 16: Gifts by cash or check.<br>
                    <span class="parent mbg far {if condition='isset($log.3)'}xbg{/if}">The amount reported as gifts by cash or check on line 16 should be $5,600.</span>
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                                    <input type="radio" name="topic_t[3]" value="1" {if condition='isset($log.3) && $log.3.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>The amount reported as gifts by cash or check on line 16 should be $5,600.</em>" ><br/>
                                    <input type="radio" name="topic_t[3]" value="2" {if condition='isset($log.3) && $log.3.topic_v eq 2'}checked{/if} title="<em class='span'>The amount reported as gifts by cash or check on line 16 should be $4,600.</em>"><br/>
                                    <input type="radio" name="topic_t[3]" value="3" {if condition='isset($log.3) && $log.3.topic_v eq 3'}checked{/if} title="<em class='span'>The amount reported as gifts by cash or check on line 16 should be $5,300.</em>" ><br/>
                                    <input type="radio" name="topic_t[3]" value="4" {if condition='isset($log.3) && $log.3.topic_v eq 4'}checked{/if} title="<em class='span'>The amount reported as gifts by cash or check on line 16 should be $5,400.</em>"><br/>
                                    <input type="radio" name="topic_t[3]" value="5" {if condition='isset($log.3) && $log.3.topic_v eq 5'}checked{/if} title="<em class='span'>The amount reported as gifts by cash or check on line 16 should be $5,500.</em>"><br/>
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                    I included both the $4,500 cash gift and the $1,000 paid for the tickets to the dinner/dance on line 16 of Schedule A.&nbsp; I added another $100 to that because, during a phone call with Mr. Sanderson on January 14th, he stated he was pretty sure that he and his wife had made at least that much in small cash donations throughout the year, although he didn't have any documentation to support that.&nbsp; So, the total I reported as gifts by cash on line 16 was $5,600.<br>
                    <br>
                    Schedule A, line 17: Gifts by other than by cash or check.<br>
                    <span class="parent mbg far {if condition='isset($log.4)'}xbg{/if}">The amount reported as other than cash or check on line 17 should be $78,170.</span>
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                                    <input type="radio" name="topic_t[4]" value="1" {if condition='isset($log.4) && $log.4.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>The amount reported as other than cash or check on line 17 should be $78,170.</em>" ><br/>
                                    <input type="radio" name="topic_t[4]" value="2" {if condition='isset($log.4) && $log.4.topic_v eq 2'}checked{/if} title="<em class='span'>The amount reported as other than cash or check on line 17 should be $30,000.</em>"><br/>
                                    <input type="radio" name="topic_t[4]" value="3" {if condition='isset($log.4) && $log.4.topic_v eq 3'}checked{/if} title="<em class='span'>The amount reported as other than cash or check on line 17 should be $44,700.</em>" ><br/>
                                    <input type="radio" name="topic_t[4]" value="4" {if condition='isset($log.4) && $log.4.topic_v eq 4'}checked{/if} title="<em class='span'>The amount reported as other than cash or check on line 17 should be $50,000.</em>"><br/>
                                    <input type="radio" name="topic_t[4]" value="5" {if condition='isset($log.4) && $log.4.topic_v eq 5'}checked{/if} title="<em class='span'>The amount reported as other than cash or check on line 17 should be $78,000.</em>"><br/>
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                    On line 17, I reported the $78,000 for the land and included another $170 for the value of the 17 hours the Sandersons spent volunteering for Have-A-Heart.&nbsp; (Mr. Sanderson believes that a conservative estimate of the value of their time is $10/hour).&nbsp; So, in total, I reported $78,170 as gifts other than by cash or check on line 17.&nbsp; Also, I made a note to the file to remind myself to prepare a Form 8283 to report this noncash gift of land, since it is valued at more than $500.<br>
                    <br>
                    Schedule A, line 20: Casualty or theft loss(es).<br>
                    <span class="parent mbg far {if condition='isset($log.5)'}xbg{/if}">The amount reported as casualty or theft loss(es) on line 20 should be $11,000.</span>
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                                    <input type="radio" name="topic_t[5]" value="2" {if condition='isset($log.5) && $log.5.topic_v eq 2'}checked{/if} title="<em class='span'>The amount reported as casualty or theft loss(es) on line 20 should be $900.</em>"><br/>
                                    <input type="radio" name="topic_t[5]" value="3" {if condition='isset($log.5) && $log.5.topic_v eq 3'}checked{/if} title="<em class='span'>The amount reported as casualty or theft loss(es) on line 20 should be $6,900.</em>" ><br/>
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                                    <input type="radio" name="topic_t[5]" value="5" {if condition='isset($log.5) && $log.5.topic_v eq 5'}checked{/if} title="<em class='span'>The amount reported as casualty or theft loss(es) on line 20 should be $16,900.</em>"><br/>
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                    Since the basis of the property was $22,000 and the insurance recovery was $11,000, I deducted the unreimbursed loss of $11,000 as a casualty/theft loss on line 20 of Schedule A.</div>
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                <div><u>Schedule A, line 1: Medical and dental expenses</u><br>
                    The correct amount to be reported on line 1 is $15,750, which is the cost of the hip replacement surgery minus the insurance reimbursement plus the $250 cost of transportation to the health care facilities.&nbsp; The hair replacement surgery is not deductible because it is cosmetic in nature.<br>
                    <br>
                    <u>Schedule A, line 6: Real estate taxes</u><br>
                    The correct amount to be reported on line 6 is $26,769.&nbsp; That includes the $10,221 of real estate taxes assessed on 1487 Omaha (excluding the special assessments for the sidewalks) plus the $16,548 on the Sandersons' ski chalet in Telluride.<br>
                    <br>
                    Note that the special assessments on 1487 Omaha are not deductible.&nbsp; Instead, special assessments are added to a property's tax basis.&nbsp; Also, the property taxes on the ski chalet are deductible&mdash;unlike the mortgage interest deduction, there are no limits on the number of properties on which the property tax deduction may be taken.&nbsp; However, the property taxes on the rental property (the second property in Telluride) are not deductible as itemized deductions because they would instead by deducted <em>before</em> adjusted gross income on Schedule E (which reports income and losses from rental properties).<br>
                    <br>
                    <u>Schedule A, line 16: Gifts by cash or check</u><br>
                    The correct amount to be reported on line 16 is $5,300.&nbsp; This includes the cash gift of $4,500 plus the $800 excess of the cost of the tickets paid for the annual dinner/dance over the value of the $200 received in services in return.&nbsp; The $100 in cash donations made throughout the year is not deductible because the Sandersons are unable to substantiate those donations.<br>
                    &nbsp;<br>
                    <u>Schedule A, line 17: Gifts other than by cash or check</u><br>
                    The correct amount to be reported on line 17 is $30,000, which is 30 percent of the Sandersons' AGI of $100,000.&nbsp; Note that since this land is long-term capital gain property, the value of the deduction is determined by its fair value, not by its original cost.&nbsp; However, the deduction for such property donated to a public charity (which "Have-A-Heart" is) is limited to the lesser of A) 30 percent of AGI ($30,000); or B) 50 percent of AGI less the amount of cash donated ($50,000 &ndash; $5,300 = $44,700).&nbsp; In this case, the lesser amount is $30,000.&nbsp; Finally, note that the value of contributed services (e.g., volunteering at the telethon) is not deductible.<br>
                    <br>
                    <u>Schedule A, line 20: Casualty or theft loss(es)</u><br>
                    The correct amount to be reported on line 20 is $900, as follows:<br>
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                                    <td>Lesser of property's tax basis or fair value before the loss: &nbsp;</td>
                                    <td style="text-align:right">$22,000</td>
                                </tr>
                                <tr>
                                    <td>Less insurance reimbursement: &nbsp;</td>
                                    <td style="text-align:right"><u>(11,000</u>)</td>
                            </tr>
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                                <td>Economic loss&nbsp;</td>
                                <td style="text-align:right">11,000</td>
                            </tr>
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                                <td>Less: $100 reduction (applies to all casualty/theft losses individually)</td>
                                <td style="text-align:right">(100)</td>
                            </tr>
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                                <td>Less: 10% of AGI (applies to all casualty/theft losses in total)</td>
                                <td style="text-align:right"><u>(10,000</u>)</td>
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                                <td>Deductible loss</td>
                                <td style="text-align:right">$&nbsp;&nbsp; 900</td>
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